NEW YORK (CNNMoney.com) -- Yahoo, the world's second largest Internet search firm, in its first earnings report since co-founder Jerry Yang replaced Terry Semel as chief executive officer, posted second-quarter results that met expectations.

But the company warned that sales for 2007 would be lower than it originally expected as it continues to struggle in the battle for online ad dollars against industry leader Google.

Investors want to hear what Yahoo! co-founder and new CEO Jerry Yang plans to do to bridge the gap between it and Google in the online ad race.

Shares of Yahoo fell about 4 percent after-hours Tuesday after rising more than 3 percent in regular trading on the Nasdaq.

Sunnyvale, Calif.-based Yahoo (Charts, Fortune 500) reported sales of $1.7 billion for the quarter, up 8 percent from a year ago.

Excluding advertising revenue that the company shares with partners, a figure known in the industry as traffic acquisition costs or TAC, Yahoo posted sales of $1.24 billion, up 11 percent from the same period last year and in line with Wall Street's expectations.

Yahoo reported net income of $161 million, or 11 cents a share during the quarter, matching consensus estimates, down slightly from Yahoo's earnings of $164 million, or 11 cents a share, a year ago.

Shares of Yahoo have plunged nearly 15 percent since April following a disappointing first-quarter earnings report where Yahoo also announced that sales for the second quarter would be lower than expected.

Despite recent improvements to Yahoo's search technology, dubbed Project Panama, the company has continued to lose market share in keyword search to Google (Charts, Fortune 500), which will report its second-quarter results on July 19.

In addition, there have been concerns that Yahoo may be losing ground in the business of graphical ads, also known as Internet display advertising, to popular social networking sites such as News Corp.'s (Charts, Fortune 500) MySpace and privately held Facebook.

Microsoft (Charts, Fortune 500) is also making a bigger effort to compete in the online advertising market, having announced plans in May to buy digital advertising technology firm aQuantive (Charts) for $6 billion.

In a written statement, Yang promised improvements at the company but did not give any specifics.

"I am focused on doing everything we need to do to strengthen our business, capture long-term growth opportunities and create increased value for our shareholders," said Yang. "By sharpening our focus, speeding execution, building our technology and talent, and investing in key growth areas, we can put Yahoo! on a clear path to fulfill its potential as an Internet leader."

During a conference call with analysts, Yang added that he will conduct a top-to-bottom review of the business over the next 100 days and that he hopes to give Wall Street more details about Yahoo's strategy during the fall.

Yang, like Semel before him, did express frustration about how Wall Street compares Yahoo to others and penalizes the company for what it doesn't own instead of focusing on the properties the company already has in its portfolio.

"Yahoo is too often defined by the competitive landscape rather than the assets we actually have," he said.

To that end, Yahoo, like Google, has been busy making acquisitions as of late, having recently announced deals to buy the remainder of online ad exchange Right Media that it didn't already own for $680 million and also buy sports news site Rivals.com.

But Yang also said that Yahoo planned to take a close look at all of its assets and would de-emphasize areas that were not performing well.

Susan Decker, who was promoted to president of Yahoo at the same time Yang was named new CEO, added in the statement that "it will take time and continued investment" to drive further growth at the company but that Yahoo is "operating with a great sense of urgency."

During the call, Decker said Yahoo needed to act more quickly and decisively to react to changing trends in the online advertising market. She also said Yahoo would look to form more partnerships in the months ahead. So far this year, Yahoo has struck ad deals with media conglomerate Viacom (Charts, Fortune 500), cable company Comcast (Charts) and newspaper publisher McClatchy (Charts).

Decker said the company will look at more acquisitions as well but also said she felt Yahoo made the right decision in buying Right Media instead of making a splashier, more expensive deal. In addition to the Microsoft-aQuantive purchase, Google announced in April it was buying DoubleClick for $3.1 billion.

But Wall Street may be growing tired of Yahoo's disappointing results though. And it appears that the company still has a ways to go before it gets back in investors' good graces. The company also announced Tuesday that it was lowering its sales target for all of 2007.

Yahoo said it now expects revenue for the full year, excluding TAC, to be in a range of $4.89 billion to $5.19 billion. The company forecast in April that sales would be in a range of $4.95 billion to $5.45 billion for 2007. Analysts had been expecting revenue of $5.19 billion.

For the third quarter, which ends in September, Yahoo said sales would be in a range of $1.17 billion to $1.31 billion. The $1.24 billion mid-point of this forecast is below Wall Street's consensus estimate of $1.3 billion for the third quarter.

So it looks like Yahoo's turnaround is now being pushed out to 2008, small consolation for investors that were expecting Yahoo to report better results this year.

"That ray of sunlight we thought we saw shooting through he clouds has gone away. It's our first full quarter of Panama being deployed and this is what we get?" said David Garrity, director of research with Dinosaur Securities.

During the conference call, new Yahoo chief financial officer Blake Jorgensen said the company was reducing its targets for the second half of the year due to slower than expected growth in display advertising.

One analyst said in order for Yahoo to boost its display sales, it needs to do a better job of attracting an audience and that acquisitions of other social networking companies might be necessary.

"Display is soft. You have other properties like MySpace and Facebook that have more in terms of growth," said Martin Pyykkonen, an analyst with Global Crown Capital. "There are other places where people spend time and Yahoo has to find ways to recapture those users. It's naive to think that Yahoo can grow faster than others given its size."

Jorgensen also said Yahoo suffered from a slowdown in the amount of search revenue it was receiving from its affiliate sites as well as sluggish international growth.

In the second quarter, revenue from affiliates fell 5 percent. And sales from Yahoo's international operations, excluding TAC, increased just 7.7 percent compared to 11.9 percent growth in the U.S.